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Sahem Weekly Trading Report (18-22/01/2015)
The third week of the year 2015 has ended with a legislative development that may end the pessimism that has started since April 2014. After amending the income tax law and imposing 10% tax on cash dividends and a postponing its taking it into force following to the community claims, the Palestine Minister of Finance approved the complete abolition of this income tax on cash dividends that was supposed to be implemented in the year 2015. By this step, all of the Palestinian capital market parties will unitize to promote the listed equities given their investment attractiveness, in which the cash dividend is an essential part of the total return on investment, in which is considered a competitive advantage for Palestine Stock Exchange PEX versus MENA markets. This step also enhances the consistency between the objectives of the legislative economic environment of the PEX and the parties that recruit these intrinsic drivers to attract investments.
In terms of trading and following the weekly fluctuations of Al-Quds Index in its first sessions of the year 2015 due to the lack of substantial news on the listed companies on one hand, and the receding in the routine movements with their price effects during the end of 2014 period on another hand; Al-Quds Index returned solidly to the 500 points level in the 2nd half of the week due to the gains of Palestine Telecommunications PALTEL’s stock- the heaviest stock in the Index- to constitute the leverage for the return of Al-Quds Index to trade above these levels. Regarding the liquidity indicators, the weakness in trading, despite the sharp and quick movements on the companies’ stocks, clearly appeared. While the lack of selling offers in the price depths mainly contributed in the upward increases with the growth of purchasing orders on the market prices. While the preliminary annual financial data disclosure anticipation remains on the investors agendas to reinforce their investments positions and calculate the return on investment of their portfolios.
The observer of the trading nature on Palestine Telecommunications PALTEL’s stock notices transforming wide investors’ category to base their financial decisions on the financial data of the company instead of randomness. Despite the losses realized due to the latest Israeli aggression on Gaza Strip that were estimated at $30 million, PALTEL disclosed, till the end of the first nine months of the year 2014, posting profits equal to 71% of the profits recorded at the end of 2013 that were JD91.8 million, and supported by the increase in the profits from investments. This was reflected in the investors’ confidence in the company’s ability to achieve the desired profitability levels in order to guarantee feasible cash dividends on one hand, and in the fact that investors consider this stock as a leading blue ship with consistent dividends and amongst the most attractive with the ability to reflect any economic or political turnout in Palestine. These facts were translated in an increase of 5.17% in PALTEL’s stock, after recording transactions that constituted 30.74% from PEX total trading value, to close at the level of JD5.90. This has led to new anticipation for the type of transactions and price levels in the coming week; by increasing the expectations of the 2014 profits and the contribution of investments to the bottom line. Due to the historical relation, the stock of Palestine Development and Investment PADICO was able to close in the green zone with gains of 0.79%, when closed at the level of $1.28. While it is clear that the expectations of PALTEL’s profits is directly related to PADICO’s stock return due to their mutual investments in each other. However, PADICO faces the risk of not achieving profitability levels in some of projects due to realizing costs and fixed expenses that cannot be avoided versus revenues decrease from the operational process in some of the sectors especially the tourism sector in Gaza Strip. Whereas, the investors anticipate the company’s ability to compensate a part of the lost revenues in Q4 2014 and especially with Gaza reconstruction lagging despite the promises and financial funding.